REG - DG Innovate PLC - Subscription to raise £400,000 and Broker Option

DG InnovateAnnouncement

23/01/2023 07:00

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RNS Number : 4735N  DG Innovate PLC  23 January 2023

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO, OR TO ANY PERSON
LOCATED OR RESIDENT IN, ANY JURISDICTION WHERE IT IS UNLAWFUL TO RELEASE,
PUBLISH OR DISTRIBUTE THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
THE MARKET ABUSE REGULATIONS (EU) NO. 596/2014 WHICH FORMS PART OF DOMESTIC UK
LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("UK MAR"). IN
ADDITION, MARKET SOUNDINGS WERE TAKEN IN RESPECT OF THE MATTERS CONTAINED IN
THIS ANNOUNCEMENT, WITH THE RESULT THAT CERTAIN PERSONS BECAME AWARE OF SUCH
INSIDE INFORMATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE
INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN AND SUCH PERSONS
SHALL THEREFORE CEASE TO BE IN POSSESSION OF INSIDE INFORMATION.

THE COMMUNICATION OF THIS ANNOUNCEMENT AND ANY OTHER DOCUMENTS OR MATERIALS
RELATING TO THE BROKER OPTION AS A FINANCIAL PROMOTION IS ONLY BEING MADE TO,
AND MAY ONLY BE ACTED UPON BY, THOSE PERSONS IN THE UNITED KINGDOM FALLING
WITHIN ARTICLE 43 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL
PROMOTION) ORDER 2005, AS AMENDED (WHICH INCLUDES AN EXISTING MEMBER OF DG
INNOVATE PLC).  ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THE BROKER
OPTION RELATES IS AVAILABLE ONLY TO SUCH PERSONS AND WILL BE ENGAGED IN ONLY
WITH SUCH PERSONS. THIS ANNOUNCEMENT IS FOR INFORMATIONAL PURPOSES ONLY, AND
DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER OR INVITATION TO SELL OR ISSUE,
OR ANY SOLICITATION OF AN OFFER TO PURCHASE OR SUBSCRIBE FOR, ANY SECURITIES
OF DG INNOVATE PLC.

23 January 2023

DG Innovate plc

 

("DG Innovate" or the "Company")

Subscription to raise £400,000 and Broker Option

 

Technology Update, Board Changes, Variation of Warrant Terms

 

 

DG Innovate (LSE: DGI), the advanced research and development company
pioneering sustainable and environmentally considerate improvements to
electric mobility and energy storage, is pleased to announce a subscription to
raise gross proceeds of £400,000 (the "Fundraise"), a broker option to enable
existing shareholders to participate in the fundraise for up to an additional
£100,000 (the "Broker Option"), and to provide an update on the Company's
development and commercialisation strategy for its suite of technologies,
together with announcing certain other corporate matters.

 

Highlights

 

·    Subscription raising gross proceeds of £400,000 through the issue of
new ordinary shares at 0.12 pence per share (the "Issue Price"), a premium of
approximately 14.3 per cent. to the mid-market closing price on the London
Stock Exchange of 0.105 pence per ordinary share on 20 January 2023

 

·    The Broker Option to raise up to an additional £100,000 at the Issue
Price from existing shareholders

 

·    Participants in the Fundraise and the Broker Option will be issued
with one warrant for every new ordinary share subscribed for with an exercise
price of 0.18 pence per ordinary share. These warrants will be exercisable for
two years from Admission ("New Warrants")

 

·    The funds raised will primarily be used to provide additional funding
for the Company's commercialisation strategy for its Enhanced Drive Technology
and Enhanced Battery Technology.  Further significant progress has been made
in both areas over recent weeks

 

·    The terms of the Company's existing warrants in issue have been
varied so that they now have an exercise price of 0.25 pence and are
exercisable until 7 April 2024

 

·    In order to reduce the Company's ongoing costs and to ensure that the
Company's board is of an appropriate size and composition for its current
stage of development, Sir Stephen Dalton and Andrew Boughtwood have both
stepped down as Non-Executive Directors of the Company with immediate effect

 

Commenting, Peter Tierney, Chief Executive Officer of DG Innovate, said: "As
set out in October last year we have a clear roadmap to commercialisation for
both our electric mobility and energy storage technologies.  Our goal is to
ensure our world-class technology is appropriately exploited and brought to
commercial scale production as quickly as possible. The proceeds of the
Fundraise will provide the funding for the next stage of our plan as we
continue to develop our technology and advance commercial discussions, both
with our existing collaboration partners and other potential launch customers.

 

"This is an exciting time for DG Innovate and I look forward to making further
announcements as we continue to progress.  I would also like to take this
opportunity to thank Sir Stephen and Andrew for their contribution to the
Company and wish them well for the future."

 

Details of the Subscription

 

The Company has raised gross proceeds of £400,000 through a subscription for
333,333,333 new ordinary shares of 0.001 pence in the capital of the Company
(the "New Ordinary Shares") at a price of 0.12 pence per share.  The New
Ordinary Shares will represent approximately 3.6 per cent. of the Company's
enlarged issued share capital.  The Issue price represents a premium of
approximately 14.3 per cent. to the mid-market closing price on the London
Stock Exchange of 0.105 pence per ordinary share on 20 January 2023, being the
latest practicable business day prior to the publication of this announcement.

 

The net proceeds of the Fundraise will be used by the Company to further
advance its Enhanced Drive Technology and Enhanced Battery Technology as it
seeks to bring these technologies to commercial scale production.  In
particular, the proceeds of the Fundraise are expected to allow certain
milestones to be met in H1 2023 and the future funding needs of the Company
will be reviewed towards the end of H1 2023 in light of the progress made and
other sources of funding, such as grants, received by, and available to, the
Company.

 

In addition, participants in the Fundraise will be issued with one warrant for
every New Ordinary Share subscribed for with an exercise price of 0.18 pence
per warrant. These warrants will be exercisable for two years from Admission
("New Warrants").

 

The Company has also agreed to issue 17,500,000 ordinary shares in the Company
("Fee Shares") and 20,000,000 warrants to an adviser to the Company for
services provided in connection with the Fundraise.  The 20,000,000 warrants
provide the holder the right to acquire such number of new ordinary shares at
an exercise price of 0.18 pence, which expire two years from Admission
("Broker Warrants").

 

If the New Warrants and Broker Warrants were ultimately to be exercised in
full, it would result in the issue of 353,333,333 new ordinary shares raising
a further £636,000 for the development of the Company's business.

 

Broker Option

 

To provide existing Company shareholders ("Existing Shareholders") with an
opportunity to participate in the Fundraise on the same basis as other
investors, WH Ireland Limited ("WH Ireland") has launched a Broker Option
under which WH Ireland will, as agent for the Company, invite subscriptions
for an additional 83,333,333 New Ordinary Shares and associated 83,333,333 New
Warrants to raise up to £100,000 at the Issue Price.

 

Existing Shareholders who hold shares in the Company and are on the register
of members as at the close of business on 20 January 2023, will be given a
right to participate in the Broker Option and all orders from such Existing
Shareholders will be accepted and processed by WH Ireland, subject to
scale-back in the event of over-subscription under the Broker Option. The
Broker Option has not been underwritten. The Broker Option opens immediately
following this announcement and will close at 4.30 p.m. GMT on 30 January
2023.

 

There is no obligation on WH Ireland to exercise the Broker Option or to seek
to procure subscribers for the Broker Option. WH Ireland may also, subject to
prior consent of the Company, allocate new shares after the time of any
initial allocation to any person submitting a bid after that time.

 

The Broker Option Shares are not being made available to the public and none
of the Broker Option Shares are being offered or sold in any jurisdiction
where it would be unlawful to do so. No prospectus will be issued in
connection with the Broker Option.

 

Interested Existing Shareholders who wish to register their interest in
participating in the Broker Option should do so through their nominated
broker, who can contact Melvyn Brown of WH Ireland via telephone on 020 7220
1666 or melvyn.brown@whirelandcm.com (mailto:melvyn.brown@whirelandcm.com) .
Existing Shareholders should communicate their interest via their stockbroker
as WH Ireland is unable to take orders from individual private investors.

 

A further announcement will be made following the end of the period during
which the Broker Option is open.

 

Technology Update

 

Enhanced Drive Technology

 

As previously announced, the Company is working in collaboration with Meritor,
the US-headquartered global commercial vehicle components company, to deliver
a scalable 250kW/400kW format of the Company's Pareta® electric drive
platform, aimed at bus and HGV applications. The advanced prototypes produced
have demonstrated good performance to date versus existing electric motor
systems from global motor manufacturers, and cycle testing and optimisation
continues. Work on the next design iterations is now underway, with the
Company targeting delivery in Q2 2023. This is intended to prove the viability
of DG Innovate's commercial proposition to potential customers.

 

Following the successful completion of this stage, the Company intends to
undertake a phase of pilot manufacturing and industrial engineering. This work
will be part-funded by the 'Scale up Readiness Validation of Parallel Motor
for Automotive Applications' ("SUPAR") project, which was awarded by the UK
Government's Advanced Propulsion Centre ("APC"), as announced on 9 September
2022. Completion of the associated pilot facility is targeted for 2024.

 

The Company has also been awarded funding for, and has commenced work on, the
MTorX project, which is exploring the potential of a motor design with no
permanent magnet. Magnet supply chains are currently a significant issue for
global motor manufacturing, with a magnetless design capable of comparable
performance to traditional technologies expected to be of significant interest
to OEMs.

 

In addition, DG Innovate was recently awarded grant funding for a feasibility
study into a larger 3MW Pareta® e-drive for marine operations, with work on
this study now underway. The Company believes the enhanced reliability,
performance and compact nature of its novel motor technology would be very
appealing to marine operators.

 

DG Innovate's long-term relationship with the UK Ministry of Defence also
continues to develop positively.

 

The Company continues to explore multiple potential routes to market for its
Enhanced Drive Technology, and in addition to ongoing commercial discussions
with its existing collaboration partners, it has recently entered into
positive dialogue with new potential customers and partners concerning both
product supply and partnerships. These include another Tier 1 supplier to the
global commercial vehicle sector and a number of systems integration
companies.

 

Enhanced Battery Technology

 

Development of the Company's proprietary hard carbon anode materials
continues. DG Innovate's anode materials are produced from a sustainable bio
waste product and are specifically developed for use in sodium-ion batteries.
As previously noted, sodium-ion batteries offer an attractive sustainable
alternative to lithium-ion, using more abundant materials, with lower carbon
footprints and less environmental impact from extraction.

 

The previously announced Cap-Size project, which is to carry out a feasibility
study for the evaluation of manufacturing the Company's sodium-ion anode
material at scale in the UK, is underway. In addition, DG Innovate's anode
material passed a significant scale-up milestone this month when it was
successfully used on the industrial scale coater at the Company's cell
manufacturing partner. This key milestone serves as a proof-of-principle for
coating on 'Giga-factory' lines and is a significant step towards full-scale
commercial production.

 

The next milestone on DG Innovate's development pathway is now expected to be
a scale-up to produce 40Ah cells in a format that serves plug-In hybrid
electric vehicles, as the Company builds the business case for full scale
anode manufacture in the UK. In parallel, the EU passed a law in December 2022
stating that all battery manufacturers must now publish a full carbon
footprint analysis of their whole supply chain, including manufacture of
active anode and cathode materials, before allowing the sale of cells. The
Company believe this further strengthens the appeal of DG Innovate's low
carbon footprint sustainable anode

 

Commercial discussions continue with potential customers and partners
regarding the Company's anode material. Subject to a successful conclusion to
the Company's scale-up activities, DG Innovate is continuing to evaluate
in-house material production as a route to market. However, the Company still
intends to primarily pursue a licensing model.

 

Board Changes

 

In order to reduce the Company's ongoing costs and to ensure that the
Company's board is of an appropriate size and composition for its current
stage of development, Sir Stephen Dalton and Andrew Boughtwood have both
stepped down as Non-Executive Directors of the Company with immediate effect.

 

Following these resignations, the Company's board comprises Nicholas Tulloch
(Non-Executive Chairman), Peter Tierney (Chief Executive Officer), John (Jack)
Allardyce (Chief Financial Officer), Martin Boughtwood (Chief Technical
Officer), Patrick (Pat) Symonds (Non-Executive Director) and Trevor Gabriel
(Non-Executive Director).

 

The remaining members of the board would like to thank Sir Stephen and Andrew
for their contributions to the Company and wish them well in their future
endeavours.

 

Director Remuneration

 

In order to reduce the cash outflow from the Company, the Directors have,
since July 2022 only taken 75% of their salary and/or fee entitlements in
cash.  The remaining 25% of the Directors' entitlements are being accrued by
the Company and will be settled in cash or through the issue of new ordinary
shares in the Company, at such time and in such manner as the Company's
Remuneration Committee determines to be appropriate.  The unpaid and accrued
Directors' fees for Sir Stephen Dalton and Andrew Boughtwood are expected to
be settled in cash shortly following their resignation from the Company.

 

Additionally, the Company's Remuneration Committee are in discussions with the
CEO, Peter Tierney, regarding increasing the exercise price of his options to
acquire 690,790,814 new ordinary shares in the Company from 0.10 pence, as
announced on 13 October 2022, to further demonstrate, at Mr Tierney's request,
his commitment to delivering value for, and to be in alignment with,
shareholders. A further announcement will be made regarding this in due
course, as appropriate.

 

Variation of Existing Warrant Terms

 

The Company currently has 790,000,000 warrants in issue affording the holder
the right to acquire one new ordinary share in DG Innovate at an exercise
price of 0.50 pence per share until 8 April 2023 and 645,640,300 warrants in
issue affording the holder the right to acquire one new ordinary share in DG
Innovate at an exercise price of 1 pence per share until 7 April 2023
(together the "Existing Warrants").  The Company announces that it has agreed
with the Warrant holders that the terms of the Existing Warrants will be
varied such that they will all now have an exercise price of 0.25 pence and
the expiry date is now 7 April 2024.

 

If the above mentioned Existing Warrants were ultimately to be exercised in
full, it would result in the issue of 1,435,640,300 new ordinary shares at
0.25 pence per share raising a further £3,589,101 for the development of the
Company's business.

 

Admission and Total Voting Rights

 

Application will be made for the 333,333,333 New Ordinary Shares and
17,500,000 Fee Shares to be admitted to the Official List of the FCA and to
trading on the Main Market of the London Stock Exchange ("Admission"). It is
expected that Admission will become effective and that unconditional dealings
will commence on the London Stock Exchange at 8.00 a.m. on 30 January 2023.

 

Following Admission of the New Ordinary Shares and the Fee Shares, the total
number of Ordinary Shares in issue will be 9,193,548,440, each with one voting
right.  The Company does not hold any rights in treasury.  The total voting
rights figure is therefore 9,193,548,440 and can be used by shareholders as
the denominator for the calculations by which they will determine whether they
are required to notify their interest in, or a change of their interest in,
the Company under the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority.

 

 

For further information please contact:

 DG Innovate plc                            C/O IFC
 Peter Tierney, CEO

 Jack Allardyce, CFO

 IFC Advisory (Financial PR & IR)           020 3934 6630
 Tim Metcalfe

 Zach Cohen

 Grant Thornton UK LLP (Financial Adviser)  020 7383 5100

 Samantha Harrison

 Jamie Barklem

 Ciara Donnelly

 OvalX (Joint Broker)                       020 7392 1400
 Tom Curran

 Thomas Smith

 WH Ireland (Joint Broker)                  020 7220 1666
 Chris Hardie
 Megan Liddell

 

About DG Innovate

 

DG Innovate is an advanced research and development company pioneering
sustainable and environmentally considerate improvements to electric mobility
and storage, using abundant materials and the best engineering and scientific
practices. DG Innovate is currently developing its products alongside a number
of major manufacturers across the transportation and energy sectors, research
institutions and the UK Government, and has filed 18 patents worldwide. DG
Innovate's current research and development activities are broadly split into
two areas, focusing on novel electric motor technologies and energy storage
solutions. Its two main products are:

 

- Enhanced Drive Technology (EDT) - High efficiency, cost-effective electric
motors + power electronics; and

- Enhanced Battery Technology (EBT) - Sodium-ion batteries offering a
sustainable energy storage solution at similar/greater energy density to
incumbent technologies at a lower cost, increased safety with lower
environmental footprint.

 

Further information may be found at: https://www.dgiplc.com
(https://www.dgiplc.com)

 

 

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